We finally have it, Apple (NASDAQ:AAPL) and Qualcomm (NASDAQ:QCOM) have settled their massive, multi-year long royalty dispute according to a join press release. Qualcomm stock surged by more than 28 percent through after-hours trading, marking the best day for the company on Wall Street since 1999.
The fight has been ongoing for sometime since 2017, but some of the major prongs of their battle kicked off in U.S. courtrooms earlier this year. The two were ramping up for a global fight across the U.S., Germany, and China, among others. At the heart of the matter was Qualcomm’s practice of demanding both an upfront payment for its chips, then in addition an ongoing licensing fee that had Apple kicking back a cut of the device sales to Qualcomm.
Qualcomm, for its part, said its business practices were fair and even claimed that Apple had engaged in corporate IP theft of its properties. The battle was indeed shaping up to be ugly, with both companies reluctantly preparing to share some secrets in the courthouse.
Apple and Qualcomm settle and enter a six year agreement
The agreement announced today will see Apple pay the other a one time fee, which we don’t know the amount of yet. From the press release:
Qualcomm and Apple today announced an agreement to dismiss all litigation between the two companies worldwide. The settlement includes a payment from Apple to Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.
We’ll probably get to know the value of Apple’s payment once the firm releases their next financial earnings. Of course the question is, why did the two settle?
The answer may lie in Qualcomm’s modem technology. For now, Qualcomm may have the most advanced and mature 5G modems, and its modem-rival Intel hasn’t quite readied its offerings yet. Dan Ives is an analyst at Wedbush Securities and said, “A settlement is a surprise to investors as ultimately Apple realized this was more about two kids fighting in the sandbox and they have bigger issues ahead with 5G and iPhone softness rather than battling Qualcomm in court.”
Apple, who is already faced with declining iPhone growth, ultimately realized it had more to lose than to gain, and Qualcomm is a critical technology supplier for the world’s most valuable device maker. Qualcomm, for its part was probably happy to protect its IP which could have been at risk if it lost in court, and may have settled for less than it claimed it was owed from Apple.
One interesting development is that last November Qualcomms’ CEO said they two were close to settling, and Tim Cook, Apple’s CEO flatly denied the claim immediately after. Seems Mr. Cook was playing this one close to the chest.
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